Lots to cover today

September 26, 2023No Comments

One of my less “narrative” blogs today. Bits n’ bites of information that I thought you should know. Some of the quotes surrounding energy under the “What he said” heading below, are noteworthy.

Stocks not supported by Fed

Rising markets increase the “wealth effect”. When people look at their IRA/RRSP, investments, etc, and see higher values and strong returns, they feel confident. They spend more, upgrade their home, etc – which boosts the economy. That’s inflationary:

“There will be no sense of urgency by anyone in the US Government to protect markets until the S&P goes back to the March lows.” Beartraps

My target is for the SPX to hit 4200. But…if Beartraps is right, we’re talking 3800! This is why I teach rules in my Online Trading Course on how to best trade a buying opportunity. A bear ain’t over until the fat lady sings. See my course for more on those rules to make the best decisions in the coming weeks.

Interest rates matter

“Going from zero to 2% was almost no increase. Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility,” he said. “I am not sure if the world is prepared for 7%.” Jamie Dimon (Billionaire, CEO JP Morgan, Former Fed Chair)

 

Stocks less attractive as rates rise

I am just putting the final touches on my “Sideways” book revisions – hopefully it will be published sometime in October. In the book, I argued that markets may have entered into another one of the sideways/ low returns choppy environments. Such periods have been seen many times in history. One thought I have of late on that potential is the attractiveness of higher yielding bonds/GIC’s/cash to investors. Here’s the DJIA chart I put in the book revision illustrating 6 distinct sideways periods since 1884:

The big question:

Why risk your portfolio in stocks with high yields readily available?

If you’re a state pension fund with a 7% assumed rate of return and aren’t increasing your allocations to bonds right now, you should be sued by every taxpayer and receive no Fed backstop.” Beartrap

 

What he said: 

  • “Oil is headed as high as $150 a barrel unless the US government does more to encourage exploration”  Continental Resources, the shale driller controlled by billionaire Harold Hamm.
  • “Crude output in the Permian Basin will one day peak as it already has in rival shale regions such as the Bakken region of North Dakota and the Eagle Ford in Texas. Without new production, “you’re going to see $120 to $150 oil. That’s going to send a shock through the system. Without policies encouraging new drilling, you’re going to see more pressure on price.” Continental Chief Executive Officer Doug Lawler in an interview with Bloomberg TV.
  • “Alternative energy strategies will not meet the current demand, energy companies need incentives to produce more.” Rafi notes in a Bloomberg BNN interview. $3.6 T (that’s trillion!) has been spent in the past decade on renewables, yet carbon has declined by only 1%.  Rafi Tahmazian, director and senior portfolio manager at Canoe Financial
  • Trudeau’s policies on oil and the green movement are “Moronically stupid  – “Canada has been taxing away production. De-incentivizing when it should be incentivizing.”  Rafi Tahmazian, during a Beartraps call
  • Given Rafi’s comments, I think even the best Canadian ETF’s will fall short of some of the US energy ETF’s. Be sure to watch my latest video covering the outlook for oil: Oil Outlook – ValueTrend
  • Reconsider buying an EFV: “50% of the car buyers are currently priced out of the market. A $400/mo payment is the magic affordability level and it’s not there now. Rates and car prices are too high. Meanwhile, dealerships are swimming in EV inventoryCox Automotive’s economist

 

Consumer pressure

“Only Richest 20% of Americans Still Have Excess Pandemic Savings. Americans outside the wealthiest 20% of the country have run out of extra savings and now have less cash on hand than they did when the pandemic began, according to the latest Federal Reserve study of household finances.  For the bottom 80% of households by income, bank deposits and other liquid assets were lower in June this year than they were in March 2020, after adjustment for inflation.” Barrons News

Chart below of Retail sales growth in the USA – courtesy multpl.com. Note that the consumer is having a hangover after his/her COVID spending spree party.

 

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